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Feb 01 2017
Free Trade and the Trans Pacific Partnership
Ronda Tuttle, CBA, Sabol & Rice

The Trans Pacific Partnership Free Trade Agreement (TPP) is a trade agreement signed by Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, Japan, and the United States, by former President Barack Obama. President Donald Trump has withdrawn from the TPP (it was waiting for approval by Congress). In an effort to understand the effects of this agreement I wanted to look at the pros and cons of the TPP and free trade.

The TPP would boost exports and economic growth by creating more jobs and prosperity for the 12 countries involved. It removes 18,000 tariffs placed on US exports to other countries. The US has removed 80 of these tariffs on foreign imports so the TPP would even the playing field. The agreement adds 223 billion a year to incomes of workers in all countries. All countries agreed to cut down on wildlife trafficking, especially elephants, rhinoceroses, and marine species. It prevents environmental abuses such as unsustainable logging and fishing.

Opponents in the United States see the pact as mostly a giveaway to business, encouraging further export of manufacturing jobs to low-wage nations. According to the Economic Policy Institute, if the TPP is agreed to, the US will lose more than 130,000 jobs to Vietnam and Japan alone. The agreement would make it easier for corporate America to outsource call centers, computer programming, engineering, accounting, and medical diagnostic jobs. The TPP would limit competition and encourage higher prices for pharmaceuticals and other high-value products by spreading American standards for patent protections to other countries. A provision allowing multinational corporations to challenge regulations and court rulings before special tribunals is drawing opposition. They argue that the TPP would expand powers for corporations to attack our environmental and health safeguards, make it easier for big corporations to ship our jobs overseas, pushing down our wages and increasing income inequality, flood our country with unsafe imported food, sneak in threats to internet freedom, jack up the cost of medicines by giving big pharmaceutical corporations new monopoly rights to keep lower cost generic drugs off the market, ban Buy American policies needed to create green jobs, and roll back Wall Street reforms.

The concept of free trade agreements is to reduce barriers to promote trade of goods without taxes or other trade barriers, trade in services without taxes or other trade barriers, unregulated access to markets, unregulated access to market information, and inability of firms to distort markets through government imposed monopoly. Most economists would agree that open world trade increases economic growth and raises living standards.

World output grows because of better use of economic scale, as a factory in one country can serve a market the size of two or more countries rather than one. It can benefit countries economy by expanding the variety of goods available to businesses and consumers by increasing competition and thereby reducing the extent of monopolistic pricing.

Opponents to free trade argue that most of the gains go to workers making $88,000.00 a year. Free trade agreements contribute to income inequality in high wage countries by promoting cheaper goods from low-wage countries. Workers in some countries and industries are likely to lose jobs as production shifts.

In general, I feel free trade agreements are good for all countries involved. However, I do not think the TPP would be beneficial to the United States in that some of its provisions restrict US safeguards and standards and the ability to litigate in US courts. I feel we do need an agreement with the Pacific countries and if some of the more detrimental portions of the TPP were modified, it would benefit all involved.